Alno – Brexit’s first victim?

Swift Electrical’s commercial director, Malcolm Scott, urges the industry not to panic over the Alno insolvency when companies as successful as Apple have previously filed for bankruptcy protection

The first thing to say is that statements issued by the Alno group in Germany, and the statement from Alno UK stating that overseas businesses will not be affected by the decision to initiate voluntary insolvency proceedings in self-administration, have now been proved untrue – Alno UK has now gone into Voluntary Administration.

German self-administration insolvency is not the kind of ‘winding up’ and sale of assets that we in the UK typically associate with insolvency. The process is far more like the USA Chapter 11 system, where a business with cash-flow problems seeks protection from creditors while it negotiates a new deal to pay off debts. During 1997, Apple filed for creditor protection, during 2008 General Motors filed for creditor protection, and in 1996 the now very successful Marvel Entertainment Group – famous for blockbuster movies like Spider-Man and The Avengers – also filed for creditor protection. All are still trading and are doing rather well.

Alno Group has a history of postponement of loan payments going back a decade. One of a number of reasons given for not reaching targets in the current period was the impact of Brexit – the fall in the value of sterling reducing the group’s net euro revenue contribution from the UK market.

The original owners of the 90-year-old group (now headed by Max Müller) have been unwilling to invest further share capital funds for many years, leaving the group regularly recirculating short-term loans from Mr Müller and from the Whirlpool Group to stay solvent. As the Müller family’s holdings have reduced, Whirlpool Group gradually became the largest shareholder, until it sold its stake to Tahoe Investors GmbH early last year. Whirlpool Group took a passive, supportive position to protect the long-term sales links with the Bauknecht brand in Germany. This allowed restructuring plans to be amended by interested parties – plans like the 2010 three-year plan to cut staff by 250 were not fully implemented.

The group had moved from 1,900 staff in 2010 on revenue of €511m (£464.83m) to 2,100 by 2015 on revenue of €522m. The January 2017 strategic plan to cut staff by 250 and reduce staff costs by €20m had been watered down by March 2017 to a plan to reduce staff by 140.

However, by 2017 there was a different major shareholder, who had no strategic sales link. The new majority shareholder was Tahoe Investors – a part of the Prevent Auto Parts Group. This group of very successful manufacturing businesses, including the Halog Group, Cascade International Investors, the Prevent Group, and Tahoe Investments, is owned by Nijaz Hastor, estimated by Forbes Magazine to be Bosnia’s wealthiest person.

As part of a restructuring of the family’s business interests during the difficult trading period in 2008, the Slovenian Prevent Global Company declared itself bankrupt. However, the family continued to trade through different businesses and has built up a large and highly successful business empire. Prevent Group has achieved notoriety in Germany for stopping production at six Volkswagen factories last summer and separately stopping production at a Fiat Chrysler SA Factory during disputes about changes imposed on Prevent without agreement.

At Alno, there is a clash of cultures with the dynamic and assertive Prevent Group challenging the more traditional Alno stakeholder groups. The ousted CEO Max Müller and the ousted finance controller Ipek Demirtas are challenging the control that has been taken from them by Almir Jazvin – the Prevent Group board appointment. Christian Brenner, with the support of Prevent Group, became the new CEO in March 2017.

As Barbaros Arslan, the new Alno UK director, is quoted in the German press as saying earlier this year “we are not here to win popularity prizes, we are investors”.

There will be restructuring at Alno, which may lead to disruption in the supply chain, and there is uncertainty over Brexit regulations and exchange rates.

Considering these various risks, it would be wise for anyone relying on Alno, to consider seeking professional advice and to look at their own individual positions, examining any available and cost-effective paths that might reduce their overall reliance on a single supplier.

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